Ever wondered why some companies acquire another?
It’s not because they like to splurge without reason or can’t be bothered to develop a new one themselves. Strategic objectives and calculated planning come into play when this happens, as you will find out below!
1. Development
When you buy over another company that has what you need to support and grow your business, it doesn’t just open up new opportunities. Two companies merged together can do so much more. Take tech giant Facebook for example, known for their many acquisitions like SnapTu and Beluga.
Because of these acquisitions, the company gained valuable skills and capabilities to develop their app and mobile technology. This is also why we acquired Panama, a business operating in the same industry, to serve as a new platform to support ours.
2. Leverage
How does growing your company whilst leveraging on the acquired company’s success sound? Not only will your business market share increase, you won’t have to take the risk of setting up your own and doing the hard work yourself either.
For example, Google bought over YouTube to improve their primary business while riding on the success and popularity the latter already enjoyed, realising that they could not mimic the same. Additionally, they also benefited from the brand name and edged out a direct competitor!
3. Competition
When acquisitions happen, they eliminate competition as well, whilst strengthening the acquirer’s position and foothold in the industry. Think about it: if one footwear business buys over its thriving competitor just opposite the street, that’s one less rival to worry about. The business would also have grown, and there would be more profits to enjoy.
Facebook, for one, is infamous for sweeping across potential threats and buying them up. Having acquired more than 50 companies to date and spending over USD$23 billion doing so, this is generally their modus operandi for growth and to take down future competition.
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